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20 Jun 2007 09:39
Matrix Income & Growth 2 VCT plc
Preliminary results for the year ended 30 April 2007
Chairman's Statement
I am pleased to present the preliminary results of Matrix Income & Growth 2 VCT plc.
Results for the year ended 30 April 2007
The results for the year ended 30 April 2007 are set out below. The totalreturn (after tax) attributable to the Ordinary Shareholders was ‚£2,378,445(2006: ‚£875,976) and the net asset value ("NAV") per Ordinary Share at 30 April2007 was 107.24 pence compared with 87.05 pence as at 30 April 2006. The aftertax revenue return before net capital gains was 1.54 pence per Ordinary Sharefor the year to 30 April 2007 (2006: loss 0.49 pence).The total return (after tax) attributable to the C Shareholders was ‚£258,730(2006: ‚£22,191) and the NAV per C Share at 30 April 2007 was 97.15 pencecompared with 94.32 pence as at 30 April 2006. The after tax revenue returnbefore net capital gains was 2.30 pence per Ordinary Share for the year to 30April 2007 (2006: 0.05 pence).These are pleasing results and, in the case of Ordinary Shareholders, alreadyreflect the benefits of the change in investment strategy pursued sinceSeptember 2005, which has begun to deliver strong income flows to the OrdinaryShare Fund. This has been combined with some net increases in the valuations ofboth Funds.New Investment Activity
Following the raising of the C Share Fund in the previous year, the period to 30 April 2007 saw increased investment in management buy-out ("MBO") transactions by your Investment Manager, Matrix Private Equity Partners.
The Ordinary Share and C Share Funds co-invested a total of ‚£3.55 million infive transactions during the year, four of which were MBOs. Details of theseare provided in the Investment Portfolio Summary below .A feature of MBO investments is their ability to generate income to the Fundsby investing in loan stocks as well as ordinary shares. The annualised yieldfrom loan stocks is now running at 8.8% and 9.8% to the Ordinary and C ShareFunds respectively. During the year interest and dividend income totalled inexcess of ‚£0.4 million.Portfolio Activity
During August the Ordinary Share Fund realised its remaining investment in MivaInc., bringing total proceeds to ‚£757,000 against original cost of ‚£612,000.This Fund now holds eleven investments made since the change of investmentstrategy in 2005, accounting for almost 60% by cost and 80% by valuation of theFund's assets. Nine of these investments are MBOs.
The C Share Fund currently holds investments in seven companies, showing valuations at this early stage of this portfolio's life of some 12% above cost.
All investments held by the Company continue to be valued in accordance withthe International Private Equity Venture Capital Valuation ("IPEVCV")guidelines. We will, in any event, always follow a consistent and prudentvaluation policy. The investments quoted on AIM and the money market securitiesare carried at market value.
Dividend
The revenue account generated a net revenue return for the year of ‚£190,379 forthe Ordinary Share Fund (2006: (‚£62,412)) and ‚£210,137 for the C Share Fund(2006: ‚£2,090). As the Ordinary Share Fund's revenue reserve remained indeficit at the end of the year, your Directors will not therefore berecommending a final income dividend for Ordinary Shareholders . However ,following some successful realisations, they will be recommending a finalcapital dividend of 6 pence per Ordinary Share at the Annual General Meeting tobe held on 11 September 2007. For the C Share Fund , your Directors will berecommending a final income dividend of 1.5 pence per C Share at the AnnualGeneral Meeting. If approved, the dividends will be paid on 19 September 2007to Shareholders on the register on 24 August 2007.
Board of Directors
At the interim stage I reported the appointment to the Board of Adam Kingdon. Iam now delighted to welcome Sally Leeson as a Non-Executive Director. Sally,who joined the Board on 1 January 2007, has held a range of roles in thefinancial services sector and in particular has worked in the private equityindustry for a number of years.
Conclusion
I would like to express my thanks to all shareholders for your continuing support of the Company. I hope to have the opportunity of meeting you at the Annual General Meeting on 11 September 2007.
Nigel MelvilleChairmanInvestment Portfolio Summaryas at 30 April 2007Ordinary Share Fund Date of first Total Book cost Valuation % of net assets by investment value ‚£ ‚£ Qualifying investments AIM quoted investments
Clarity Commerce Solutions plc July 2000 510,000 489,600 3.8%Customer relationship management
software BBI Holdings plc May 2006 118,738 176,191 1.3%
Development and manufacture of rapid test diagnostic products
SectorGuard plc August 2005 150,000 150,000 1.2%
Provision of manned guarding, mobile patrolling, and alarm
response services Flightstore Group plc March 2001 254,586 0 0.0%In-flight retail services ------------------ ------------------
------------------ ------------------
1,033,324 815,791 6.3% Unquoted investments Youngman Group Limited October 2005 1,000,000 2,981,455 23.1%
Manufacturer of ladders and access
towers Gyro International Limited February 2005 750,000 1,506,688 11.7%Brand Communications agency Campden Media Limited January 2006 975,000 990,371 7.7%
Magazine publisher and conference
organiser
British International Holdings June 2006 832,827 832,827 6.4%Limited Supplier of helicopter services
VSI Limited April 2006 365,764 657,465 5.1%Developer and marketer of 3D software
PXP Holdings Limited (Pinewood December 2006 588,886
588,886 4.6%Structures) Designer, manufacturer and
supplier of timber frames for
housing
Blaze Signs Holdings Limited April 2006 339,546
535,644 4.1%Signwriter
Racoon International Holdings December 2006 517,350 517,350 4.0%Limited (formerly Castlegate 435 Limited) Supplier of hair extensions, hair
care products and training PastaKing Holdings Limited June 2006 274,624 274,624 2.1%
Supplier to the educational and
food service market Vectair Holdings Limited January 2006 243,784 258,567 2.0%A provider of air care and sanitary washroom products
Callserve Communications Limited October 2000 300,000
- 0.0%Voice over Internet Protocol Monactive Limited (in March 2001 642,857 - 0.0%administration)
Software asset management tools
and services Recite Limited August 2003 1,000,000 - 0.0%Sales support software
Award International Holdings plc March 2004 250,000
- 0.0%Sales promotion activities ------------------ ------------------
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8,080,638 9,143,877 70.8% ------------------ ------------------ ------------------ ------------------Total qualifying investments 9,113,962 9,959,668 77.1% ------------------ ------------------
------------------ ------------------
Non-qualifying investments Money market funds 1 3,095,867 3,095,867 24.0% AIM quoted and unquoted 971 1,276 0.0%investments ------------------ ------------------
------------------ ------------------
Total non-qualifying investments 3,096,838 3,097,143 24.0% ------------------ ------------------
------------------ ------------------
Total investments 12,210,800 13,056,811 101.1% ========== ========== ========== ========== Other assets 268,218 2.1% Current liabilities (412,635) (3.2%) ------------------ ------------------
------------------ ------------------
Net assets 12,912,394 100.0% ========== ========== ========== ========== 1 Disclosed within Current assets (Investments at fair value) in the Balance Sheet C Share Fund Date of first Total Book cost Valuation % of net assets by investment value ‚£ ‚£ Qualifying investments AIM quoted investments BBI Holdings plc May 2006 82,893 123,002 1.4%Development and manufacture of rapid test diagnostic products ------------------ ------------------
------------------ ------------------
82,893 123,002 1.4% Unquoted investments PXP Holdings Limited December 2006 411,114 411,114 4.6%(Pinewood Structures) Designer, manufacturer and supplier of timber frames for housing Racoon International December 2006 361,177 361,177 4.1%Holdings Limited (formerly Castlegate 435 Limited) Supplier of hair extensions, hair care products and training VSI Limited April 2006 122,897 220,911 2.5%Developer and marketer of 3D software PastaKing Holdings Limited June 2006 191,720 191,720 2.1%Supplier to the educational and food service market British International June 2006 167,173 167,173 1.9%Holdings Limited Supplier of helicopter services Blaze Signs Holdings April 2006 58,953 93,001 1.0%Limited Signwriter ------------------ ------------------
------------------ ------------------
1,313,034 1,445,096 16.2% ------------------ ------------------ ------------------ ------------------Total qualifying 1,395,927 1,568,098 17.6%investments Non-qualifying investments Money market funds 1 7,193,154 7,193,154 81.0% Unquoted investments 4 4 0.0% ------------------ ------------------ ------------------ ------------------Total non-qualifying 7,193,158 7,193,158 81.0%investments ------------------ ------------------
------------------ ------------------
Total investments 8,589,085 8,761,256 98.6% ========== ========== ========== ========== Other assets 320,012 3.6% Current liabilities (196,243) (2.2%) ------------------ ------------------
------------------ ------------------
Net assets 8,885,025 100.0% ========== ========== ========== ==========
1 Disclosed within Current assets (Investments at fair value) in the Balance
Sheet
Further details of the investments in the MPEP portfolio may be found on MPEP's website: www.matrixpep.co.uk
Non-Statutory analysis between the Ordinary Share and C Share Funds
Profit and Loss Accountsfor the year ended 30 April 2007 Ordinary Share Fund C Share Fund Revenue Capital Total Revenue Capital Total ‚£ ‚£ ‚£ ‚£ ‚£ ‚£ Unrealised gains - 2,540,352 2,540,352 - 172,171 172,171on investments held at fair value Realised losses on - (205,547) (205,547) - - - investments held at fair value Income 466,244 - 466,244 440,445 - 440,445 Investment (68,701) (206,102) (274,803) (50,856) (152,566) (203,422)management fees Other expenses (170,067) - (170,067) (128,198) - (128,198) -------------- --------------- ---------------
-------------- --------------- ---------------
Return on ordinary 227,476 2,128,703 2,356,179 261,391 19,605 280,996activities before taxation Tax on ordinary (37,097) 59,363 22,266 (51,254) 28,988 (22,266)activities -------------- --------------- ---------------
-------------- -------------- ---------------
Return 190,379 2,188,066 2,378,445 210,137 48,593 258,730attributable to equity shareholders ======== ======== ======== ======== ======== ======== Return per share 1.54 p 17.66 p 19.20 p 2.30 p 0.53 p 2.83 p Average number of 12,391,147 9,145,990shares in issue Balance Sheetsas at 30 April 2007 Ordinary C Adjustments Total of both Share Fund Share Fund (see note Funds (per below) Statutory Balance Sheet) ‚£ ‚£ ‚£ ‚£ Non-current assets Assets held at fair 9,960,944 1,568,102 - 11,529,046value through profit and loss - investments Monies held pending 3,095,867 7,193,154 - 10,289,021investment ------------- ------------ ------------ 13,056,811 8,761,256 21,818,067 Current assets Debtors and 208,815 51,936 (113,447) 147,304prepayments Cash at bank 59,403 268,076 - 327,479 ------------- ------------ ------------ ------------ 268,218 320,012 (113,447) 474,783 Creditors: amounts (412,635 ) (196,243) 113,447 (495,431)falling due within one year ------------- ------------ ------------ Net current assets (144,417) 123,769 (20,648) ------------- ------------ ------------ Net assets 12,912,394 8,885,025 21,979,419 ======= ========= ====== Capital Called up share 120,411 91,460 211,871capital Capital redemption 11,395 - 11,395reserve Share premium account - - - Capital reserve - 3,096,007 172,171 3,268,178unrealised Special distributable 5,680,611 8,409,167 14,089,778reserve Profit and loss 4,003,970 212,227 4,216,197account ------------- ------------ ------------ Equity shareholders' 12,912,394 8,885,025 21,979,419funds ======== ======= ======== Number of shares in 12,041,147 9,145,990 issue Net asset value per 107.24 p 97.15 p 1p Share
Note: the adjustment above nets off the inter-fund debtor and creditor balances, so that the "Total of Both Funds" balance sheet agrees to the Statutory Balance Sheet below.
Reconciliation of Movements in Shareholders' Funds for the year ended 30 April 2007
Ordinary Share C Share Fund Fund ‚£ ‚£ Opening Shareholders' funds 10,938,976 8,626,295
Net share capital (bought back)/subscribed (405,027)
-in the year Profit for the year 2,378,445 258,730 Dividends paid in year - - ------------- ------------ Closing Shareholders' funds 12,912,394 8,885,025 ======== =======Profit and Loss AccountFor the year ended 30 April 2007 Year ended 30 April 2007 Year ended 30 April 2006 Revenue Capital Total Revenue Capital Total ‚£ ‚£ ‚£ ‚£ ‚£ ‚£ Unrealised gains/ - 2,712,523 2,712,523 - (1,458,362) (1,458,362)(losses) on investments held at fair value Realised (losses)/ - (205,547) (205,547) - 2,588,791 2,588,791 gains on investments held at fair value Income 906,689 - 906,689 311,585 - 311,585 Investment (119,557) (358,668) (478,225) (72,107) (216,322) (288,429)management fees Other expenses (298,265) - (298,265) (299,800) - (299,800) ------------- --------------- --------------
------------- --------------- --------------
Profit/(loss) on 488,867 2,148,308 2,637,175 (60,322) 914,107 853,785 ordinary activities before income tax Tax on ordinary (88,351) 88,351 - - - - activities ------------- -------------- -------------
------------- -------------- -------------
Profit/(loss) on 400,516 2,236,659 2,637,175 (60,322) 914,107 853,785 ordinary activities after taxation ======== ========= =========
======== ========= ========= Earnings per share Ordinary Shares 1.54 p 17.66 p 19.2 p (0.49) p 7.40 p 6.91p C Shares 2.30 p 0.53 p 2.83 p 0.05 p (0.61) p (0.56) p
All the items in the above statement derive from continuing operations. No operations were discontinued in the year. There were no other gains or losses in the year.
The total column of this statement is the profit and loss account of the Company.
Note of Historical Cost Profits and LossesFor the year ended 30 April 2007 Year ended Year ended 30 April 2007 30 April 2006 ‚£ ‚£
Profit on ordinary activities before taxation 2,637,175 853,785
(Less)/add unrealised (gains)/losses on (2,712,523) 1,458,362investments (Less)/add realisation of revaluation (losses) (1,596,829) 480,868/gains of previous years --------------- --------------- Historical cost (loss)/profit on ordinary (1,672,177) 2,793,015activities before taxation ========= ========= Historical cost (loss)/profit for the year (1,672,177)
1,256,892
after taxation and dividends
========= =========Balance SheetAs at 30 April 2007 30 April 2007 30 April 2006 ‚£ ‚£ Non-current assets Assets held at fair 11,529,046 5,643,559 value through profit and loss - investments Monies held pending 10,289,021 9,751,436 investment --------------- --------------- 21,818,067 15,394,995 Current assets Debtors and prepayments 147,304 1,936,269 Cash at bank 327,479 2,462,495 --------------- --------------- 474,783 4,398,764 Creditors: amounts (495,431) (228,488) falling due within one year --------------- --------------- Net current (20,648) 4,170,276 (liabilities)/assets ========= ========= Net assets 21,797,419 19,565,271 ========= ========= Capital and reserves Called up share capital 211,871 217,121 Capital redemption 11,395 6,145 reserve Share premium account - 8,557,026 Capital reserve - 3,268,178 (1,041,174) unrealised Special distributable 14,089,778 8,034,754 reserve Profit and loss account 4,216,197 3,791,399 ========= ========= Equity shareholders' 21,797,419 19,565,271 funds ========= ========= Net asset value per share Ordinary shares 107.24 p 87.05p C shares 97.15 p 94.32p
Reconciliation of Movements in Shareholders' Funds for the year ended 30 April 2007
Year ended Year ended 30 April 2007 30 April 2006 ‚£ ‚£ Opening Shareholders' funds 19,565,271 11,780,212 Net share capital (bought back)/ (405,027) 8,467,397 subscribed in the year Profit for the year 2,637,175 853,785 Dividends paid in year (1,536,123) --------------- --------------- Closing Shareholders' Funds 21,797,419 19,565,271 --------------- ---------------Cash flow StatementFor the year ended 30 April 2007 Year ended Year ended 30 April 2007 30 April 2006 ‚£ ‚£ Net cash inflow/(outflow) from operating 100,740 (227,203)activities
Capital expenditure and financial
investment Purchase of investments - equities and (3,546,925) (3,286,309)loan stock Disposals of equities and loan stock 2,016,346 5,462,960 ------ ------ Net cash (outflow)/inflow from investing (1,530,579) 2,176,651activities Dividends Equity dividends paid - (1,536,123) ------- ------ Net cash (outflow)/inflow before (1,429,839)
413,325
financing and liquid resource management
Financing Purchase of own shares (167,592) (181,089) Share capital raised - 8,648,486 ------ ------ Net cash (outflow)/inflow from financing (167,592)
8,467,397
Management of liquid resources Movement in money market investments (537,585) (7,892,613) --------------- --------------- Net cash (outflow)/inflow as at 30 April (2,135,016) 988,1092007 Notes:
1. The accounts have been prepared under the fair value rules of the Companies Act 1985, and in accordance with applicable accounting standards in the United Kingdom and with the Statement of Recommended Practice, `Financial Statements of Investment Trust Companies', revised December 2005.
As a result of the Directors' decision to distribute capital profits by way ofa dividend, the Company revoked its investment company status as defined undersection 266 (3) of the Companies Act 1985, on 7 September 2005.
2. The net asset value per Ordinary Share is based on net assets at the end of the year, and on 12,041,147 Ordinary Shares (2006: 12,566,147), being the number of Ordinary Shares in issue on that date.
The net asset value per C Share is based on net assets at the end of the year,and on 9,145,990 C Shares (2006: 9,145,990), being the number of C Shares inissue on that date.3. The revenue return per Ordinary Share is based on the return attributable toequity Shareholders of ‚£190,379 and is based on 12,391,147 Ordinary Shares,being the weighted average number of Ordinary Shares in issue during theperiod.The revenue return per C Share is based on the return attributable to equityShareholders of ‚£210,137 and is based on 9,145,990 C shares, being the weightedaverage number of C Shares in issue during the period.
4. 75% of the fees payable to the Investment Manager are charged against realised capital reserve. This is in line with the Board's intended long-term split of returns from the investment portfolio of the Company.
5. The financial information set out in these statements does not constitutethe Company's statutory accounts , in terms of section 240 of the Companies Act1985,for the year ended 30 April 2007 but is derived from those accounts.Statutory accounts will be delivered to the Registrar of Companies after theAnnual General Meeting.6. The Annual Report will be circulated by post to all Shareholders shortly andcopies will be available thereafter to members of the public from the Company'sregistered office.
7. The Annual General Meeting of the Company will be held at 12 noon on 11 September 2007 at One Jermyn Street, London SW1Y 4UH. The Annual General Meeting will be followed by separate class meetings of the holders of Ordinary Shares and C Shares.
MATRIX INCOME & GROWTH 2 VCT PLC